Definition

The term beneficiary is used to describe the person, or persons, that receive funds, property, or other benefits, from an insurance policy or will. A beneficiary is usually named by the benefactor when the insurance policy, or will, is signed.

In its most common form, a beneficiary is someone that inherits assets from another; therefore it's synonymous with the term inheritance.

Explanation

Typically, a beneficiary is a spouse, son or daughter of the deceased. However, it can also be a charitable organization, or any other entity designated by the benefactor. If the primary beneficiary is no longer living, or does not qualify under a restriction outlined by the benefactor, then the assets are passed to a contingent beneficiary.

In matters such as retirement plans, the law requires that a spouse be the designated beneficiary of the account. If not, the spouse must sign a written notice indicating they are aware of an alternate designation.